Railroads during the 1890s continued to see further expansion (although not to the degree of prior decades), particularly in the Midwest were the famed granger roads had taken root tapping virtually very nook and cranny in America's Breadbasket. Of course, this dizzying web of trackage would come back to haunt this railroad's by the 1960s when they were nothing more than a drain on profits. However, at this time these branches were highly profitable in agricultural traffic since railroads were the only viable means to move goods to market. The decade would see knuckle couplers and air brakes federally mandated on all trains drastically improving safety and efficiency.
The only significant downturn of the decade was the Panic of 1893 which saw several railroads slip into receivership and some disappear forever. Some of these railroads were well-known Class I carriers including the Baltimore & Ohio, Erie, Northern Pacific, Reading and even the Santa Fe and Union Pacific. Despite the financial troubles, however, there were bright spots and improvements during the decade. One of the most significant was the recovery of the rail system in the South. In 1894 the Southern Railway was formed by the merger of the Richmond & Danville, East Tennessee, Virginia & Georgia and several other systems. The Southern was created by J.P. Morgan who spent heavily on upgrading the new merged system.
After this initial merger the new Southern Railway began to grow through consolidations with other smaller railroads and would go on to becoming one of the most profitable railroads of all time before its merger with the Norfolk & Western to become today's Norfolk Southern Railway. During the Southern Railway’s final form the railroad stretched from Richmond to Florida and west to Memphis and New Orleans and would be made up of some 125 smaller railroads. The Southern Railway’s most important main line stretched from Atlanta to Washington, D.C. and was entirely double-tracked.
Two other systems that would help to rebuild the South were the Atlantic Coast Line and Seaboard Air Line railroads. The Atlantic Coast Line, also known as the ACL or Coast Line, was synonymous with the South and served points from Richmond, Virginia to Florida and east to Birmingham, Alabama. The Seaboard Air Line is perhaps best remembered for being a somewhat smaller version of the Atlantic Coast Line as everywhere the ACL went so too did the SAL (and thus it is not surprising that the two would decide to merge in the late 1960s). The industry during the decade saw two major improvements. First, railroads began switching to steel rails instead of iron. Steel was not only much stronger than iron it also had a longer lifespan and because of this railroads were willing to pay a little more for it as in the end it meant a better bottom line.
The other improvement to take place was the introduction of the electric locomotive, firs used by the B&O. The Baltimore Belt Railroad and Howard Street Tunnel project undertaken by the Baltimore & Ohio Railroad essentially kicked off electrified rail operations in the United States for main line systems in 1895. Of note, however, the actual first electrified rail operations in the United States occurred in 1888 when General Electric successfully demonstrated the motive power on the Richmond Union Passenger Railway. In any event, the B&O’s project was known as the Baltimore Belt Railroad, which was constructed to fill a gap to connect the railroad’s New York-Washington (north-south) and Washington – Cumberland (east-west) main lines.
Prior to this the railroad had to use a circuitous car ferry operation across Baltimore Harbor to reach the two lines, which made competing effectively with rival Pennsylvania Railroad nearly impossible. By 1900 the country's total rail mileage had increased from 163,597 in 1890 to over 193,000. By this time the railroad industry was so well entrenched and an established mode of transportation that it seemed rails poked into every small community and area of the country, particularly in the Midwest and Northeast. The era would see several east-west and north-south main lines in operation including no less than five routes connecting the west coast with Midwest and Deep South. Revenues by this time had topped $1 billion with three quarters of a million workers employed in the industry. By the 20th century this number continued to increase.